Ethereum Token Standards Explained – ERC-20, ERC-721, and ERC-1155

In the exciting world of blockchain and cryptocurrencies, Ethereum has emerged as a groundbreaker, setting the stage for the proliferation of decentralized applications (DApps) and smart contracts.

Central to this ecosystem are Ethereum’s token standards, which dictate how digital assets are created, managed, and interacted with. 

In this comprehensive article, we will discover the most prominent Ethereum token standards. Ethereum request for comment (ERC)  ERC-20, ERC-721, and ERC-1155 – in an easily understandable way, exploring their unique features and applications.

ERC-20                                               

ERC-20 tokens are a big deal in the world of Ethereum and blockchain for a good reason. They can easily interact with other Ethereum applications. So, you can use these tokens in decentralized finance (DeFi) apps, ICOs, or any other place that accepts them all because they follow the same rules.

What Makes ERC-20 Special? Well, it’s all about standardization. The ERC-20 standard sets out a blueprint for how tokens on the Ethereum network should behave. Think of it as a common language that all these tokens speak. This standardization allows you to use any ERC-20 token in the same way, no matter who created it.

Use Cases of ERC-20 

Now, let’s talk about why they are so popular. ERC-20 tokens are incredibly versatile, and they serve a multitude of purposes:

• Cryptocurrencies
• Stablecoins
• Utility Tokens

Cryptocurrencies

Many cryptocurrencies, like Ethereum’s native token, Ether (ETH), are actually ERC-20 tokens. This standard makes it easy for them to work seamlessly with exchanges and wallets. So, when you see a wallet supporting ERC-20 tokens, you know you can store ETH and many other tokens in there.

Stablecoins

Stablecoins, which are cryptocurrencies pegged to the value of traditional currencies like the US dollar, often use the ERC-20 standard. Tether (USDT) and USD Coin (USDC) are excellent examples. Their stability makes them ideal for trading and a reliable store of value.

Utility Tokens

A lot of blockchain projects issue their own ERC-20 tokens as utility tokens. These can represent access rights, voting power, or discounts within a particular platform. It’s like having an amusement park ticket that not only lets you in but also gives you discounts on the rides.

ERC-721 

Now, let’s dive into ERC-721, where uniqueness reigns supreme. Unlike ERC-20 tokens, ERC-721 tokens are non-fungible. Each token is one-of-a-kind and cannot be exchanged on a one-to-one basis. They are ideal for representing assets where individuality and ownership matter, such as digital collectibles, unique artworks, and in-game items.

A famous example that showcases the potential of ERC-721 tokens is CryptoKitties. In this blockchain-based game, each CryptoKitty is a distinct Non-Fungible Token (NFT) with its traits, and ownership is verifiable on the Ethereum blockchain. This uniqueness has opened new frontiers for digital creators, artists, and collectors, allowing them to prove ownership and rarity in the digital realm.

Use Cases of ERC-721 

So, what do we do with these unique tokens? Well, quite a few things:

• Digital Collectibles
• Digital Art
• Gaming

Digital Collectibles

You might have heard of CryptoKitties. Each one of those adorable, or maybe bizarre, virtual cats is an ERC-721 token. Collectors go wild for these because of their traits, and you can even breed them to create new, unique kitties.

Digital Art

Artists and creators have jumped on the NFT train, too. They tokenize their work as ERC-721 tokens, proving ownership and authenticity in the digital world. This opens up new possibilities for artists to sell digital art and earn royalties when resold.

Gaming

In the gaming world, ERC-721 tokens are a game-changer (pun intended). In many blockchain-based games, you can own unique in-game items, characters, and even land as NFTs. This gives players true ownership of their digital treasures and the freedom to trade them across games.

ERC-1155

Now, let’s introduce you to the versatile hybrid of the Ethereum token standards: ERC-1155. Developed by the blockchain gaming platform Enjin, ERC-1155 combines the best ERC-20 and ERC-721 standards.

This innovation allows developers to create fungible and non-fungible tokens under a single smart contract. Imagine having a single contract that can manage in-game currency (fungible tokens) and unique in-game items (non-fungible tokens)  that’s ERC-1155 in action.

The efficiency of ERC-1155 is evident in gaming and application development. Game developers can streamline their assets by creating multiple token types within one smart contract, reducing gas fees, and simplifying the management of various token standards.

Use Cases of ERC-1155

ERC-1155 is like a jack-of-all-trades when it comes to blockchain applications. It’s found applications in various domains:

• Gaming
• Cross-Platform Compatibility
• Real-World Assets

Gaming

Game developers love ERC-1155 because it simplifies in-game economies. You can have fungible tokens as in-game currency and unique NFTs for rare in-game items. Plus, it streamlines item trading between players.

Cross-Platform Compatibility

ERC-1155 is like the universal translator of blockchain. It can work across different blockchain ecosystems. If you have an item or currency in one game, it might be usable in another game that supports ERC-1155 tokens.

Real-World Assets

Beyond gaming, this standard is being used to tokenize real-world assets. Imagine you want to represent real estate ownership as NFTs or create unique collectibles linked to physical objects ERC-1155 can handle that.

Conclusion

In the evolving Ethereum landscape, ERC-20, ERC-721, and ERC-1155 have emerged as the cornerstones of the blockchain world. ERC-20 tokens make interchangeability a breeze, ERC-721 tokens celebrate digital uniqueness, and ERC-1155 tokens offer a harmonious blend of both.

These standards are incredibly adaptable and have given rise to many use cases, from DeFi to digital art, gaming, and much more. Ethereum continues to push the boundaries of what’s possible in the blockchain world, and these token standards play a pivotal role in shaping the future of decentralized applications and the broader crypto ecosystem.

Whether you’re a developer, an artist, or a crypto enthusiast, understanding these token standards is your key to unlocking the potential of Ethereum’s vast world of digital assets. As you embark on your journey into this exciting space, remember that the captivating aspect of Ethereum lies in these standards, which empower individuals and businesses to redefine the digital economy.